The US clean energy trade surplus (yes, surplus) with China

A new Pew report on the trading relationship between the US and China in clean energy technology has an eye-catching title: “Advantage America”. The key finding is no less surprising – their research estimated that the US currently has a US$1.63 billion clean energy trade surplus with China. (While the Pew Charitable Trusts are non-partisan, one of their initiatives is to promote clean energy development in the US.)

This runs completely counter to the conventional wisdom. China is perceived to be the clean energy powerhouse, churning out huge volumes of solar modules (the world’s five largest solar PV manufacturers are all Chinese), wind turbine rotors and towers, smart meters and Li-ion batteries. But the nuances are significant. Take a look at the chart below, from p.15 of the Pew report:

The conventional wisdom is correct, but only as regards module production. Capital equipment? Wafers, solar materials, polysilicon? Those are exclusively US exports to China – the Chinese don’t export any of those to the US at all.

The research provides a wake-up call and a reminder that while Chinese companies have great strengths in their core capacities of large-scale manufacturing and high-volume assembly, the volume is not yet large enough to match the value of US exports of specialty materials, sensitive electronics, control systems, and capital equipment for that large-scale manufacturing.

The breakdown of the surplus is interesting as well. The report broke the clean energy trade down into three sectors: solar PV, wind and “energy smart” technologies. Half of that $1.63 billion trade surplus figure comes from solar PV, where the US enjoys a $913m surplus, 32% more in exports to China than what came back across the Pacific. Looking at these figures, you can see why the Pew report came to the conclusion that domestic incentives and clean energy policies will have a more significant impact on the development (or lack thereof) of the US clean energy sector than the size of clean energy imports from China. The report calls for greater certainty and clarity from policymakers to finally determine the future of many initiatives facing uncertain futures.

None of this should be surprising but it is a salutary reminder about the blinkers that the conventional wisdom can sometimes bring. Trade isn’t just about the volume of imports and exports – the value added by US innovation in the high-margin high-technology end of each sector of the clean energy market is enough to comfortably beat the high-volume production of China. Best of breed technology and continuous innovation will keep the markets of both the US and China growing and it’s heartening to see the technology and knowledge transfer represented by this trade surplus.